Microsoft is in the process of almost completely unraveling its $7 billion acquisition of Nokia’s smartphone business, and before that the company wrote off essentially the entire value of its $6.3 billion acquisition of Seattle-based advertising technology aQuantive.
So why will LinkedIn be any different?
That was literally the first question asked of Microsoft CEO Satya Nadella, along with LinkedIn CEO Jeff Weiner, during a conference call with investors and analysts about the Redmond company’s agreement to acquire the business-oriented social network for $26.2 billion.
“Satya, you’ve had a tougher track record in large M&A, why is this deal different?” asked analyst Brent Thill, managing director at UBS.
Nadella explained that he looks at mergers and acquisitions from three dimensions: whether the acquired company helps Microsoft expand into new markets, or improve its position in existing markets; whether there are helpful “tailwinds” in terms of usage and technology; and whether the acquisition is “at the core of Microsoft.” He said the LinkedIn acquisition “checks all those boxes.”
“The other thing that also we’ve talked about with Jeff is the structure, because of course we’ll learn from the past. I want us to have LinkedIn retain its culture, its brand, the way they go about building this network, and do that independently while achieving the integration for our customers,” Nadella said. “It’s not about changing the core of LinkedIn, it’s about bringing the best of LinkedIn and the best of Microsoft and our executional handicap on this is, in fact, a lot lower than any of the others that you have talked about in the past.”
The company’s $8.5 billion Skype acquisition has gone more smoothly than Nokia and aQuantive did. All of those acquisitions were pursued by former Microsoft CEO Steve Ballmer. More recently, under Nadella, the company has experienced success with smaller deals by largely leaving the acquired companies intact.
Analysts with Nomura struck an optimistic tone in a note to clients this morning: “LinkedIn has the potential to strengthen existing solutions by integrating the “professional cloud” with the “professional network” and driving improved user experiences for business professionals,” they wrote. “Microsoft has a poor track record when it comes to large acquisitions (Nokia and aQuantive are prime examples); however, we are hopeful that given the synergistic nature of the offerings and Mr. Nadella’s leadership, this acquisition can be successful.”
Microsoft shares fell about 2 percent on the announcement Monday and have slipped further in trading so far today.